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Ericsson set to lose a packet

If everyone has a mobile phone now, why are some makers losing cash?

Mobile phone and network company Ericsson expects to lose more than £689m this year making its phones.

While Ericsson doesn't just make money from handsets, the products for which most consumers will know the company, this announcement sent the company's stock into a dive. Motorola recently announced a slowdown in the number of handsets sold, which it marked as being a mobile phone plateau.

Mobile phones are being sold at cost or at a loss with connection packages to gain market share all over Europe, with telcos such as Vodafone and BT Cellnet banking on users paying for premium services such as news, music, location-based information and games when the next generation of mobile phone technology comes on-stream. This technology, GPRS and later UMTS, will provide an always-on connection for data to phones.

In its third-quarter report Ericsson, one of Sweden's biggest employers, said it now expects its handset division to make a loss of 10.1bn kronor (£689,734,655) in the fourth quarter of this year, as compared to a loss of 5.9bn kronor during the first nine months of 2000.

Ericsson said it hopes to break into profit by the second half of next year, which coincides with the projected timetable for the start of the European roll-out of third generation mobile phone technology.

Yet Nokia is doing well, posting good results for its overall business yesterday. There was some bad news, however, for those waiting to get mobile phones with faster data capabilities. Nokia does not expect sales of its forthcoming GPRS (General Packet Radio Service)-compliant handsets to start picking up until the second half of 2001. Nokia’s GPRS handsets will only ship in limited volumes during the first half of next year.

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